Chairmen of scheduled banks in Bangladesh can now remain member of governing bodies of any subsidiaries or funded companies abroad, as the regulator reverses restrictions particularly regarding remittance-earning outfits.
Also at greater liberty are bank directors, too, in the latest changes made in view of the reigning global situation of economic volatility in particular. The directors who have been serving as chief or president of other executive committees of banks also can enjoy the same opportunity on offshore companies.
Banks have numerous executive committees, like audit committee and risk- management committee, directors usually lead the committees.
Earlier in June in 2022, Bangladesh Bank said the chairman or head of any other auxiliary committee cannot serve as director or member of its any subsidiaries or funded companies both at home and abroad.
The central bank in its circular had said if any sitting chairman of a bank currently served at any subsidiaries, the post must be vacated by 30 June 2023.
But the regulator now changes gear, citing the challenging situation abroad stemming from the war in Ukraine that has been upsetting many set orders of geopolitical and economic dimensions.
"Experience is very important to run the subsidiaries abroad under the present economic situation," the latest circular reads.
It notes that the subsidiaries are those which are actually engaged in remitting funds home. The subsidiaries are exchange houses, money-transfer operators, and finance companies overseas.
Explaining the change of heart regarding greater liberty of bank board of directors, the central bank says the banks "may incur loss if inexperienced people run those subsidiaries which impact the balance sheets of banks adversely".
Banks are often reported to be in liquidity crunch and dollar shortages in case of opening letter of credit (LC) for imports and external-payment settlement. Cascading impacts affect production and consumer prices.
However, economists and bankers say that the latest order is discriminatory as it will create 'conflicts of interest'. They said the law should be equal for all parts. If the economy slumps now, the central bank may defer it. But they all say the law should be equal.
Dr. Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh, told the FE: "If the economic situation is bad abroad, then changes should be made later.
"The central bank may defer it six months or more. But both home and abroad issues should be considered equally".
Bankers argue that keeping unchanged the overseas governing body of local a bank has argument as the changing procedure is very complex there.
The regulators in Europe and other economies take time to change the people of governing bodies of financial institutions.
"To my mind, the central bank kept unchanged it due to hard procedures to change people for the existing governing body ," said Syed Mahbubur Rahman, managing director of the Mutual Trust Bank.
jasimharoon@yahoo.com
